Over the last series of articles we have looked at how different types of government policies can have an impact on the growth of an economy as a whole. However, the successful implementation of monetary and fiscal policies is not as easy as it might initially appear on paper. By far the biggest threat to a government intervention into the economy is the consumers which it is trying to impact, and their ability to understand and evaluate those policies themselves. Specifically, if the population base of a given economy has the insight to interpret an economic policy in a way that compromises its credibility, it is possible for that plan to be undermined by the foresight of individuals within that economy itself.
As mentioned in previous articles, there are a number of ways in which personal investors can take advantage of economic policies to ensure that they benefit from the government’s involvement. However, if the government in power does not have a solid track record of implementing strong economic policies, or if the public does not actually believe that the measures being taken are enough to have a positive result in the economy, they may start taking additional measures on their own which will inadvertently counter-act the policies themselves. Continue reading